Terror taking rural bank route: RBI

A hitherto unknown corporate entity was found depositing Rs 1 crore in a rural bank in remote Punjab on a daily basis for over a month and taking it out at the end of the day as loan.

In a similar case, in an urban cooperative bank in western Uttar Pradesh in 2006, an individual was found to have deposited more than Rs 250 crore over a period of time and having taken it out at the same time.

Such cases could have easily passed off as suspect money laundering transactions allegedly involving local traders and businessmen but after intelligence agencies arrested two associates of Hurriyat leader G M Bhat in November last year, suspicious transactions in cooperative and rural banks have attracted heightened security concern.

The government has warned regional rural banks (RRBs) and urban cooperative banks (UCBs) to be on guard against tainted money finding its way into their depository with the probability of terror outfits misusing such accounts to fund terror activities. In a notification issued to all RRBs and UCBs, the Reserve Bank of India said all banks should develop suitable mechanism for enhanced monitoring of accounts suspected of having terrorist links and report all such transactions to the Financial Intelligence Unit (FIU).

Jamali Khan and Danish Anwar — who were detained in Udhampur in November 2007 while they were ferrying a consignment of Rs 50 lakh to the Valley from Delhi allegedly at Hurriyat leader Bhat's instructions — had been working together in the Ajmer branch of a cooperative bank.

Investigations had revealed that Jamali, when he was posted in the bank's Daryaganj branch in Delhi in 1985-86, used to convert dollars into Indian currency for Bhat and had in the process converted up to $800,000 for the Hurriyat leader who also had an account in the same branch. Later, Jamali left the bank job and worked as fulltime hawala operator for many terror outfits.

Though the recent RBI guidelines of keeping an eye on suspicious transactions are part of an old ‘know your customer' norm, reiteration of the fact through a fresh notification comes at a time when many enforcement agencies have warned the government of huge money being laundered through these RRBs and UCBs and many having suspect terror links.

Banks have been advised to carry out risk categorisation review of customers once in six months and introduce a system of periodic updation of customer identification data (including photographs) after the account is opened. Even in the case of low risk category customers, the periodicity of such updation should not be less than once in five years, the RBI has said.

At the same time, the bank has asked RRBs and UCBs not to deny account opening facilities to unsuspecting customers. "It is clarified that, in such cases, banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her,” the RBI note said.